Fidelity Quietly Shutters ActionsXchange; Low Margins of Corporate Actions Biz Blamed

Fidelity Investments is in the process of shutting down its Fidelity Corporate Actions Solutions (formerly known as Fidelity ActionsXchange) business line and its corporate actions data validation service, prompting an exodus of clients to alternative solutions, WatersTechnology has learned.

The firm decided to bow out of the space in August 2019, sources say, and clients have spent the past year identifying and migrating to alternative providers. The vendor informed clients but has not made any formal announcement about the closure or given any reason for its decision. And those providers tasked with filling the gap left by Fidelity’s departure report drastically differing experiences: Some vendors say the move has handed them an influx of new clients, and that Fidelity collaborated with clients and vendors to identify alternative solutions, though others say Fidelity has provided little assistance in transferring clients to new providers.

“Customers are very angry. They’ve been left in the lurch. Some of them had long-term contracts,” says an executive at one data provider, who says it was months before Fidelity informed them of the decision, and even longer to transition clients because Fidelity—not the corporate actions data providers themselves—controlled the relationships with the end clients of its service, making it difficult to ensure a smooth transition.

Fidelity Corporate Actions Solutions provides a cleansed and normalized managed feed of corporate actions and tools for handling the corporate actions process at end-user firms. It captures corporate actions feeds from third-party vendors, then formats the announcements into a composite record. It also combines validated information with data from clients or their custodians into a composite summary that clients can use to monitor key event dates and manage exceptions via a workstation. Additionally, it offers a notification and response workflow tool for automating instructions to portfolio managers and custodians, and software to calculate and automate the processing of payments arising from corporate actions.

Sources say two factors most likely prompted Fidelity’s decision to close the business: First, other vendors have made inroads into this market in recent years, and second, the nature of corporate actions processing as a low-margin business. The costs of operating in this space can be high—particularly the cost of acquiring corporate actions datafeeds from multiple vendors before even applying any proprietary value—and as the oldest provider in the space, Fidelity may have needed to make technology upgrades that simply weren’t worth the expense.

“The cost dynamics of running a managed service in this space are pretty tough to manage. Costs are often higher than revenue, and you need global critical mass,” says Virginie O’Shea, CEO of Firebrand Research, whose first research paper, published this summer, provided an analysis of the corporate actions space.

Sources say the most likely replacements are IHS Markit’s IMActions and FIS’ XSP services, though data management platform vendor GoldenSource is also reporting positive interest in its services, despite not being a direct competitor.

“Fidelity ActionsXchange is a long-standing and important participant in this marketplace,” says John Eley, CEO of GoldenSource. “Their decision to alter their business model has highlighted the need for software and service solutions that are flexible and can work with any data provider. We’ve already landed a client as a result of Fidelity’s actions, and are in talks with others about providing a solution that’s flexible in terms of workflow and support for other data sources.”

It’s not clear when Fidelity will stop supporting clients. Fidelity officials did not respond to requests for comment.